Why Lenders Don’t Tell You the Benefits of Adjustable Mortgage Rates?
Adjustable Mortgage Rates are quite disputed as the less beneficial plan, as the risk associated is indefinite. But has anyone told you how adjustable mortgage rate can help save you thousands of dollars flowing simply towards interest payments? Get to know why adjustable mortgage rates are the most preferable when it comes to a long tenure mortgage.
What Are the Rates Printed on Those Banners and Posters?
Mortgage lenders display one of their best rates among all their bill boards and poster, which we are all aware of. These rates which attract most clients, are they actually offered? Yes, they are the rates offered for Adjustable Rate Mortgages. Now that we know adjustable mortgage rates are pretty lower than that of fixed rate mortgages, we are yet not satisfied enough to take such a risk of unpredictable fluctuation. So let’s understand more.
How long are You Going to Actually Stay in the Home?
We all know, lower the mortgage period, lower the risk the lender assumes and hence give a better rate than a longer period mortgage. But in the long term, adjustable rate mortgages have a much lower average mortgage payment rate than that of fixed mortgage rate, and in short term lenders eventually offer a lower rate in both cases (average or fixed).
In the second scenario, adjustable mortgage rates are quite lower in the introductory period in order to attract clients which give us an upper hand in case we want to sell the house. When one wishes to sell a house which is currently under a mortgage, the equity amount is what the owner gets and the rest is collected by the mortgage lender.
Let’s say your mortgage tenure is of 30 years, but plan to sell your home ten years down the road. You equity value in case of average mortgage rate would be higher than that of the fixed mortgage, as lower payments towards interest would be paid, and more principal amount would be cleared off.